Senator pushes banker removal from Fed boards

Sen. Bernie Sanders sees an opportunity in the departure of J.P Morgan Chase & Co. CEO Jamie Dimon from the New York Federal Reserve’s board.

Dimon, at the center of political fallout in Washington over a major trading loss at the big bank, has left the New York Fed board after his second term expired at the end of December.

Sanders – Independent of Vermont — thinks Dimon’s departure represents a good time for him to make public his intent to re-introduce this year a bill that would ban any financial industry executive from sitting on the 12 regional Fed boards.

“Jamie Dimon was the poster child for why we need to end the serious conflicts of interest at the Fed, but he was not alone. Two-thirds of the directors at the New York Fed are hand-picked by the same bankers that the Fed is in charge of regulating,” said Sanders in a statement. “Allowing Wall Street CEOs to serve as Federal Reserve directors and hand-pick its members and staff is a clear example of the fox guarding the henhouse.”

The Sanders measure, if enacted, would represent a dramatic overhaul of the Fed’s structure first established in 1913.

The 1913 law setting up the Fed established 12 regional Fed banks that are not federal agencies. Instead, they are government chartered corporations run by member banks with nine member boards of directors.

The banks that are members of each region get to choose six of the board members: three Class A directors from the banking industry and three Class B directors from private industry. Three other Class C directors are chosen by the Fed in Washington.

Until passage of the Dodd-Frank Act, the regional Fed boards approved the bank presidents. Now, the three Class A board members do not get to vote for the bank presidents.

Sanders would have all three classes of directors chosen by the Federal Reserve board of governors in Washington, which is made up of individuals nominated by the president and confirmed by the Senate.

Sanders says Dimon represented a major conflict: He sat on the New York Fed board during the 2008 crisis, while his bank received more than $390 billion in low-interest loans as part of a Fed bailout. Nevertheless, Sanders’ legislation is not on a fast-track in the Senate.